Mergers & Acquisitions (M&A) Modeling Exam Combined Package Deal

What is the correct formula for Goodwill? A. Market value of acquirer - net identifiable assets of target B. Price paid - fair market value of net identifiable assets of target C. Market value of acquirer - fair market value of target D. Book value of target's equity + Adjustments - ANS B. ...

How can you think about calculating combined equity value? - ANS if no Stock is used, Combined Equity Value = Company A's Equity Value. If it's a 100% Stock deal, Combined Equity Value = Company A's Equity Value + Company B's Purchase Equity Value. How can you think about calculating comb...

Financial reasons one company might acquire another? - ANS Economies of scale Geographic expansion Gain Market Share Seller is Undervalued Acquire Customers or Distribution Channels Tax Reductions Product Expansion/Diversification "Fuzzy" reasons for M&A? - ANS IP/Patent/Key Tech De...

What is an M&A model - ANS used to analyze the financial profiles of 2 companies, the purchase price, and how the purchase is made, and determines whether the buyer's EPS increases or decreases. Walk me through a basic merger model - ANS Step 1: Making assumptions about the acquisition - the...

1. Company A, with a P / E of 25x, acquires Company B for a purchase P / E multiple of 15x. Will the deal be accretive? - ANS You can't tell unless you know that it's a 100% Stock deal. If it is a 100% Stock deal, then it will be accretive because the Buyer's P / E is higher than the Seller...

Why would a company want to acquire another company? - ANS A company would acquire another company if it believes it will earn a good return on its investment - either in the form of a literal ROI, or in terms of a higher Earnings Per Share (EPS) number, which appeals to shareholders. There are...